UK ‘will not recover until 2012’

The UK economy could decline for another year and take a further two years to recover, according to a respected think tank.

A National Institute of Economic and Social Research study says the current economic decline is “very similar” to the slowdown at the start of the 1980s.

Chancellor Alistair Darling has already admitted the Treasury got it wrong over the length and depth of the recession.

The economy has contracted by 4.2% since May 2008, according to NIESR.

“The downturn since last autumn has been far deeper than people expected in any part of the world,” Alistair Darling told the BBC’s Andrew Marr Show.

He declined to forecast ahead of his Budget on 22 April how much the UK economy would shrink during the current year.

The latest NIESR estimate predicts a 1.5% decline in the first quarter of 2009.

Decline exceeding 1990s

Their forecast is consistent with what other independent forecasters are predicting for this year and next.

The total depth of the decline in output has already exceeded the downturn of the last recession in the early 1990s, the economic think tank said.

Although figures have not yet reached those of the 1980s recession, NIESR has recorded a similar pattern of decline.

“If the 1980s profile were followed, output would continue to decline for up to another year and it would take two further years before the level of output enjoyed at the start of 2008 would be reached again,” said NIESR director Martin Weale.